REConnect Newsletter Volume 37 – OPEN ACCESS

We are pleased to present the 37th Volume of “OPEN ACCESS” - our monthly newsletter on REC Mechanism. 

The present volume covers analysis on following main topics:
 
  • Recent steps taken by Tamil Nadu, Maharashtra & Delhi towards small scale solar projects. 
  • MERC order on solar RPO for Tata Power Company – Distribution.
  • ApTel’s judgment on fossil fuel based co-gen plants..
  • CERC’s order on REC issuance of UP’s co-gen plants. 
  • REC Trade Analysis – November 2013 & December 2013. 

To access the current volume (OPEN ACCESS Vol. 37) please Click Here.

To read past volumes of our newsletter please follow this link

We hope you will find this volume of OPEN-ACCESS an insightful read. As always, look forward to your feedback and continued support. 
 

Regards,

Team REConnect

REC Trade Report – December 2013

December 2013 marks the end of Q3 for FY14. Overall the results have sustained optimism as compared to the preceding trading month. With last three months still remaining in this year and chances of higher buyer-side participation in the subsequent sessions, we expect REC markets to reverse its fading lustre considerably. As per REC Registry, the market crossed 0.4 million mark in terms of REC redeemed. This volume (4,11,744 RECs) traded in a single session is the highest redeemed volume of this fiscal and more importantly marginally matches the volume of March 2013 (last month of FY13). A more detailed analysis for each kind of RECs can be read as under:

Non-Solar RECs :

Buy bids for non-solar credits increased by 30.73 percent in comparison to last month’s stats. The most encouraging fact, considering a holistic view of FY14, was the cleared volume crossing the 0.4 million mark. Clearing percentages at both exchanges (IEX and PXIL) were recorded at parity (over 9%). With a total transactional value of non-solar RECs of 605.8 million INR, price of each non-solar REC remained at floor price of Rs. 1500 per REC.

Solar RECs:

The change in demand and supply as compared to previous month was up this month by 7.18 percent and 47.37 percent respectively. Although, the prices here also remained at floor we can still expect a jump in demand as we slip in the last quarter.

For previous months trade results – Click Here.

MERC waives solar RPO targets for Tata Power Company – Distribution

The electricity regulator of Maharashtra through an order dated 20th Dec’13 has extended some relief to Tata Power Company (TPC) – Distribution. MERC has relaxed the solar RPO targets as stipulated under relevant RPO regulations for three consecutive fiscals. TPC – D has been directed to meet the shortfall in RPO for FY 2010-11, FY 2011-12 and FY 2012-13 cumulatively by FY 2016.

In pronouncing such waiver of solar RPO targets, MERC has taken into consideration the efforts put to comply with previous targets, by TPC-D. It is convinced by the proposed addition of 25MW Dhiganchi Solar Power Plant, along with some other steps taken by TPC-D, that the latter has taken adequate timely steps and thus warrants such a relaxation.

As per data furnished in the order, TPC-D has an obliga-tion to buy 36.54, 39.90 & 43.57 MUs of solar power from FY14 t FY16 respectively. TPC-D expects to have a shortfall of 51 MUs by the end of FY16, even after taking ade-quate steps, under the existing scene of obligations.

This move is expected to take away 63,440 solar RECs from solar REC market, which is currently marred by poor demand. Also, this order may propel other states to come with similar orders which will in the long run, hit market further badly.

The order can be assessed here .

DISCOMs not to be fastened with purchase obligation from conventional co-gen plants : APTEL

A full bench of the tribunal on 2nd Dec’13, pronounced a landmark judgment on the issue of fastening of purchase obligation on DISCOMs, for power procurement from fossil-fuel based co-generation (co-gen) units. The petitioner (Lloyds Metal & Energy Ltd) had filed a petition against MERC for not extending relief in terms of determination of separate tariff and fixing of purchase obligation.

APTEL has taken this laudable decision with an intent to answer an important question of “whether fastening of purchase obligation can be one of the methods to pro-mote fossil fuel based co-gen plants or not”

The APTELs decision which was negative to the above question can be read as -

“Upon conjoint reading of the provisions of the Electricity Act, the National Electricity Policy, Tariff Policy and the intent of the legislature while passing the Electricity Act as reflected in the Report of the Standing Committee on Energy presented to Lok Sabha on 19.12.2002, we have come to the conclusion that a distribution company cannot be fastened with the obligation to purchase a percentage of its consumption from fossil fuel based co-generation under Section 86(1)(e) of the Electricity Act, 2003. Such purchase obligation 86(1)(e) can be fastened only from electricity generated from renewable sources of energy. However, the State Commission can promote fossil fuel based co-generation by other measures such as facilitating sale of surplus electricity available at such co-generation plants in the interest of promoting energy efficiency and grid security, etc.“

A favorable decision for Lloyds Metals & Energy Limited, in this case, would have given DISCOMs an additional source to procure power from, to offset their RPO tar-gets. This might have impacted the REC markets consid-erably, as then DISCOMs would have shied away from participating as a prospective buyer of RECs.

The copy of judgment can be assessed here.

Financial Restructuring plan for DISCOMs almost ready

The readiness of Financial Restructuring Plans (FRP) in some states is heralding good times ahead for present cash-strapped distribution companies.

Distribution companies of Rajasthan, Uttar Pradesh and Tamil Nadu have proactively finalized the process and have already issued bond to lenders, while Haryana is in the process of issuing such bonds. According to data provided in an article of Business Standard, these  four states (out of 7) constitute major chunk of debt (1.9 lakh crore INR).

As per a senior PFC official –  UP will overcome its short-term liabilities by 2014 and TN by 2017. This is expected to bring liquidity in the market and strengthen a timely financial settlement mechanism for power generators.

To encourage reduction of AT&C losses, a transitional financial mechanism has been put in place. The mechanism provides liquidity support equal to the value of additional energy saved through loss reduction. Going forward the emphasis needs to be on increasing tariffs for subsidized consumers rather than subsidizing consumers.

 

CERC may soon be answerable to Parliament

The government of India has recently proposed to extend autonomous power to infrastructure regulators of the  nation. Infrastructure regulators such as TRAI and CERC will have to now be answerable to Parliament. The regulators of electricity, post, airports, highways will now have to submit annual reports to Parliament and be legally accountable.

According to reports, such a move is expected to bring uniformity in functioning of regulators.

The draft regulatory reform bill plans to fix tenures of members of regulators and insulating the same from any political interference. A member of regulator will not be allowed to engage in any consultancy project with any organization during incumbency or 2 years after resignation.

Autonomy empowers regulators to build their own staff or to disburse funds from Consolidated Funds of India, without seeking government approval.

This particular move will curb the issue of inadvertent delays and will enhance the efficiency of these regulatory bodies, subject to nod from parliamentarians.

Past media articles contemplating such a  move can be read here -

Economic Times

Hindu

Kerala finalizes its Solar Energy Policy 2013

Kerala is the latest state to  join the league of states (TN,AP,Gujarat,MP, Rajasthan) which have final state solar energy policies in place. On 25th Nov 2013, the state finalized its state solar policy. The following are the highlights of the policy:

  • Kerala aims to have an installed capacity of 500 MW till 2017 and of 2500 MW by 2030. The policy will remain in force till any further solar energy policy is introduced.
  • Net-metering is available for all agencies that consume grid power and have some solar installations with govt. subsidies. KSERC will notify the pooled cost of power purchase and feed-in-tariff for procurement by KSEB.
  • Solar procurement obligation (SPO) is mandated for all HT/EHT consumers to the tune of 0.25 % till March 2015 (with annual increase of 10%).  April 2015 on-wards the same shall become applicable for commercial & LT consumers also.
  • Incentives -
  1. No open access charges  for wheeling of solar power within the state.
  2. No wheeling charges and T&D losses for solar captive generators.
  3. Electricity Duty exempted for projects under the policy.
  4. Banking facility (conditional) available for captive generators.
  • ANERT shall be the nodal agency for facilitating the provisions under the policy.

For other provisions please refer the policy document  - here

Media articles can be assessed on the following links:

Hindu Businessline

The Hindu

 

Financial assistance for small hydro power projects

According to a recent  release (Release no.101304) in press information bureau of India, the Hon’ble minister for new and renewable energy has produced in a written note to Lok Sabha, that financial assistance will be provided to states from GoI to develop more small hydro power projects. MNRE is providing central financial assistance (CFA) to small hydro power projects in both private and public sectors. Through the assistance MNRE also expects states to identify more potential sites.

Vital information pertaining to previous funds was also provided.

MNRE quotes that the total funds released under SHP Programme during 2010-11, 2011-12 and 2012-13 were Rs. 151.99 crores, Rs.154.45 crores and Rs.158.92 crores respectively. 6474 potential SHP sites with an aggregate capacity of 19,749 MW have been identified in the country. So far, 985 small hydro power projects with an aggregate capacity of 3754 MW have been setup and 265 projects aggregating to 945 MW are under implementation in various States.

For other similar updates on small hydro power – click here

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